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D.F. Krause
  D.F.'s Column Archive
February 8, 2006
Is Kerkorian's Guy Wacky Enough to Save GM?

General Motors Chairman Rick Wagoner is very pleased to welcome Jerome York to the board of directors. Sort of like the Bushes are ecstatic when Ted Kennedy shows up for dinner.


York may be a perfectly capable board member, but Wagoner doesn’t really care. What he cares about is that York is in the camp of Kirk Kerkorian.


Kirk Kerkorian is not the suicide doctor. This is a common point of confusion. (Or at least, this columnist thinks it would be funny if it were.) But when he starts buying up stock in your company, he tends to make CEOs start looking around for the nearest cyanide pill.


Kerkorian – a casino, airline and motion picture magnate – first rose to prominence in the 1980s as a potential hostile suitor for Chrysler Corporation, threatening to grab control of Lee Iacocca’s empire. A decade later, Kerkorian took another stab at control of Chrysler, this time with Iacocca in tow. But when Daimler-Benz beat him to the punch and got the troops at Chrysler to turn their salutes from Highland Park to Stuttgart (by way of Auburn Hills), Kerkorian turned his unrequited affections on General Motors.


Turned out the old girl was easy. Well, that and GM stock is not exactly flying off the shelves these days. This has allowed Kerkorian to grab control of nearly 10 percent of it, which makes the establishment types in the Renaissance Center just a tad nervous.


Not to worry, Kerkorian explains. I’m selling a whole bunch of it for a tax loss anyway.


This was December, and the GM brass breathed a sigh of relief.


But two months later, Kerkorian suddenly finds himself owning as large a share of GM as he did before his tax-loss selloff. And the brass are getting nervous!


Not to worry, Kerkorian explains. I plan to be a passive investor. Well, maybe, perhaps, I might  try to control a seat on the board.


But probably not. Unless I do.


Enter Jerome York, a consultant to Kerkorian’s Tracinda Corporation, which is the holding company for – well, for Kirk Kerkorian! Tracinda buys the stuff Kerkorian wants to control (or “passively” invest in) because Kerkorian controls Tracinda. As a consultant to Tracinda, York could be helping Kerkorian with anything from interior decorating to lip balm application, but I think we can be relatively confident his positions on the board will be roughly equivalent to Kerkorian’s positions.


Roughly in the same way that low-level Venezuelan bureaucrats believe what Hugo Chavez believes. And like it!


But Rick Wagoner is glad to have York on the board. Really glad! He said so.


"Jerry brings years of business experience and knowledge of the automotive industry to the GM board," Wagoner said. "We are pleased to welcome him to our Board."


See? It’s fine. York has years of business experience. He has knowledge of the automotive industry. He’ll be OK. He won’t advocate anything crazy. Will he?


The early returns: York wants shareholder dividends and executive salaries cut. (The company made both moves in York's first full day on the board.) He also wants to get rid of Hummer and Saab, eliminate 30,000 jobs and close 12 facilities. And the brass are getting nervous!


Then again, with all of GM’s problems, maybe a wacky board member would be a welcome diversion. And it’s hard to completely write off a guy who is calling for dramatic changes at GM, because anything good whatsoever would be a dramatic change for GM these days.


York, just weeks before his election to the board, issued a major broadside against GM management – warning, among other things, that the company had only enough cash left to last it another 1,000 days. Could that be true? This is a company that makes its money from selling cars but spends more money paying health premiums than it spends building cars.


Even a stopped clock is right twice a day. Even if you’re paranoid, it doesn’t mean they’re not after you. York may or may not be the loony handpuppet of an egomaniacal investor who tries to take over companies for sport.


But GM, which has found itself in the dumper after years of “sensible” decisions, might do worse than to listen to a loon.

© 2006 North Star Writers Group. May not be republished without permission.


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